Correlation Between Wabash National and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Wabash National and Boston Beer at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wabash National and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wabash National and Boston Beer, you can compare the effects of market volatilities on Wabash National and Boston Beer and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wabash National with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and Boston Beer.
Diversification Opportunities for Wabash National and Boston Beer
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wabash and Boston is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Wabash National is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wabash National are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Wabash National i.e., Wabash National and Boston Beer go up and down completely randomly.
Pair Corralation between Wabash National and Boston Beer
Considering the 90-day investment horizon Wabash National is expected to generate 0.92 times more return on investment than Boston Beer. However, Wabash National is 1.09 times less risky than Boston Beer. It trades about -0.07 of its potential returns per unit of risk. Boston Beer is currently generating about -0.38 per unit of risk. If you would invest 1,668 in Wabash National on October 22, 2024 and sell it today you would lose (45.00) from holding Wabash National or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wabash National vs. Boston Beer
Performance |
| Timeline |
| Wabash National |
| Boston Beer |
Wabash National and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wabash National and Boston Beer
The main advantage of trading using opposite Wabash National and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wabash National position performs unexpectedly, Boston Beer can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Boston Beer will offset losses from the drop in Boston Beer's long position.| Wabash National vs. Rev Group | Wabash National vs. Gencor Industries | Wabash National vs. Alamo Group | Wabash National vs. Columbus McKinnon |
| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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